B-218165.2, B-218165.3, JUN 10, 1986, 65 COMP.GEN. 643

B-218165.2,B-218165.3: Jun 10, 1986

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GENERAL ACCOUNTING OFFICE - RECOMMENDATIONS - CONTRACTS - PRIOR RECOMMENDATION - CLARIFIED DECISION SUSTAINING PROTEST AGAINST AGENCY'S USE OF NEGOTIATED COST TYPE CONTRACT FOR ACQUISITION OF MESS SERVICES IS MODIFIED TO RECOMMEND ASSESSMENT OF OVERALL RISKS OF PROCUREMENT AND DETERMINATION OF PROPRIETY OF USE OF COST-TYPE CONTRACT. IF AGENCY REASONABLY DETERMINES THAT UNCERTAINTY IS SO GREAT OR HAS SUCH A DIRECT IMPACT ON PRICING OR COSTS THAT IT DIRECTLY AFFECTS AN OFFEROR OR BIDDER'S ABILITY TO PROJECT ITS COSTS OF PERFORMANCE SO AS TO PRECLUDE USE OF A FIXED-PRICE CONTRACT. WAS NOT JUSTIFIED. THE ARMY STATES THAT ITS DETERMINATION TO USE A COST-TYPE NEGOTIATED CONTRACT AT FORT JACKSON WAS BASED ON THE LACK OF RELIABLE DATA ON WHICH TO PREDICT THE EFFORT REQUIRED AND THE POPULATION OF TRAINEES TO BE FED WITH SUFFICIENT ACCURACY TO PERMIT OFFERORS TO BID ON A FIXED PRICE BASIS.

B-218165.2, B-218165.3, JUN 10, 1986, 65 COMP.GEN. 643

GENERAL ACCOUNTING OFFICE - RECOMMENDATIONS - CONTRACTS - PRIOR RECOMMENDATION - CLARIFIED DECISION SUSTAINING PROTEST AGAINST AGENCY'S USE OF NEGOTIATED COST TYPE CONTRACT FOR ACQUISITION OF MESS SERVICES IS MODIFIED TO RECOMMEND ASSESSMENT OF OVERALL RISKS OF PROCUREMENT AND DETERMINATION OF PROPRIETY OF USE OF COST-TYPE CONTRACT. IF AGENCY REASONABLY DETERMINES THAT UNCERTAINTY IS SO GREAT OR HAS SUCH A DIRECT IMPACT ON PRICING OR COSTS THAT IT DIRECTLY AFFECTS AN OFFEROR OR BIDDER'S ABILITY TO PROJECT ITS COSTS OF PERFORMANCE SO AS TO PRECLUDE USE OF A FIXED-PRICE CONTRACT, AGENCY MAY EXERCISE OPTIONS UNDER CURRENT COST TYPE CONTRACT IN ACCORDANCE WITH FEDERAL ACQUISITION REGULATION.

MATTER OF: UNITED FOOD SERVICES-- RECONSIDERATION, JUNE 10, 1986:

THE DEPARTMENT OF THE ARMY AND RICE SERVICES, INC. (RICE) REQUEST RECONSIDERATION OF OUR DECISION UNITED FOOD SERVICES, INC., B-217211, SEPT. 24, 1985, 64 COMP.GEN. 880, 85-2 CPD PARA. 326. IN THAT DECISION WE FOUND THAT THE ARMY'S DECISION TO USE A COST-TYPE, NEGOTIATED CONTRACT IN LIEU OF A FIXED-PRICE, FORMALLY ADVERTISED CONTRACT IN PROCURING MESS SERVICES AT FORT JACKSON, SOUTH CAROLINA, WAS NOT JUSTIFIED. SUSTAINING UNITED FOOD SERVICES' PROTEST, WE NOTED THAT ALTHOUGH THE COMPETITION IN CONTRACTING ACT (CICA), TITLE VII OF PUB.L. 98-369, ELIMINATED THE STATUTORY PREFERENCE FOR FORMALLY ADVERTISED (NOW "SEALED BID") PROCUREMENTS, CICA AND THE FEDERAL ACQUISITION REGULATION (FAR) PROVIDE CRITERIA FOR DETERMINING WHETHER A PROCUREMENT SHOULD BE CONDUCTED BY THE USE OF SEALED BIDS OR COMPETITIVE PROPOSALS. WE RECOMMENDED THAT THE ARMY NOT EXERCISE CONTRACT RENEWAL OPTIONS WITH THE AWARDEE, RICE, AND INSTEAD CONDUCT A NEW PROCUREMENT UNDER THE APPLICABLE PROVISIONS OF THE FAR. WE MODIFY OUR PRIOR DECISION.

THE ARMY STATES THAT ITS DETERMINATION TO USE A COST-TYPE NEGOTIATED CONTRACT AT FORT JACKSON WAS BASED ON THE LACK OF RELIABLE DATA ON WHICH TO PREDICT THE EFFORT REQUIRED AND THE POPULATION OF TRAINEES TO BE FED WITH SUFFICIENT ACCURACY TO PERMIT OFFERORS TO BID ON A FIXED PRICE BASIS. THE ARMY CONTENDS THAT BUDGETED RECRUITMENT AND TRAINING GOALS DID NOT PROVIDE A SUFFICIENTLY ACCURATE ESTIMATE OF WORKLOAD AND THAT ACTUAL EXPERIENCE UNDER THE CONTRACT THUS FAR HAS SHOWN MONTHLY ATTENDANCE FLUCTUATIONS ABOVE AND BELOW THE SCHEDULED NUMBER OF TRAINEES BY OVER 20 PERCENT WITH ONLY A FEW DAYS NOTICE. THE ARMY STATES THAT MOST FOOD SERVICE CONTRACTORS HAVE STATED THAT THEY COULD PROVIDE FIXED-PRICE SERVICES IF MEAL COUNTS DEVIATED NO MORE THAN OR 20 PERCENT AND HAS PROVIDED AN ANALYSIS OF MEAL COUNT DATA FROM FIVE MILITARY INSTALLATIONS WHICH SHOWS VARIATIONS IN MONTHLY AVERAGE MEAL COUNT RANGING FROM -38 PERCENT TO 31 PERCENT FROM THE ANNUAL AVERAGE.

THE ARMY ALSO STATES THAT ALL BUT ONE OF THE DECISIONS RELIED UPON IN OUR ORIGINAL DECISION CONCERNED CONTRACTS FOR DINING FACILITY ATTENDANT SERVICES (MESS ATTENDANT SERVICES), WHEREAS THE WORK INVOLVED UNDER THIS CONTRACT IS FOR FULL FOOD SERVICES, WHICH ENCOMPASS A WIDER VARIETY OF SERVICES, SUCH AS DETERMINING HOW MUCH FOOD TO REQUISITION, ACCOUNTING FOR FOOD USE AND CASH RECEIPTS, PREPARING AND SERVING FOOD, AND CLEANING DINING FACILITIES. MESS ATTENDANT SERVICES ARE REPORTEDLY LESS THAN 20 PERCENT OF THE TOTAL EFFORT UNDER THIS CONTRACT.

RICE, THE AWARDEE, STATES THAT OUR REVIEW OF A CONTRACTING AGENCY'S DETERMINATION TO NEGOTIATE IS LIMITED TO ASCERTAINING WHETHER THE DETERMINATION IS REASONABLY BASED, AND CITES GOVERNMENT SALES CONSULTANTS, INC., B-211375, NOV. 9, 1983, 83-2 CPD PARA. 546, AND W. B. JOLLEY, B-209933, JUNE 6, 1983, 83-1 CPD PARA. 609. RICE ASSERTS THAT THE INNOVATIVE APPROACH THAT IT HAS BEEN REQUIRED TO ADOPT AT FORT JACKSON, COUPLED WITH UNFORESEEN PROBLEMS, SUCH AS GOVERNMENT TRANSPORTATION SHORTAGES WHICH CAUSED DELAYS IN FOOD DELIVERIES, INOPERABLE AND DEFECTIVE GOVERNMENT-FURNISHED EQUIPMENT, AND UNCERTAIN MEAL SCHEDULES BECAUSE OF WEATHER AND THE VAGARIES OF BASIC TRAINING, DEMONSTRATE THAT THE ARMY'S DETERMINATION TO USE A COST-TYPE CONTRACT AT FORT JACKSON WAS REASONABLE. RICE FURTHER ARGUES THAT IMPLEMENTATION OF OUR RECOMMENDATION THAT THE ARMY NOT EXERCISE ANY CONTRACT RENEWAL OPTIONS IS BOTH DISRUPTIVE AND UNNECESSARY UNDER CICA.

IN A MORE RECENT DECISION INVOLVING ESSENTIALLY THE SAME PARTIES, UNITED FOOD SERVICES, INC., B-220367, FEB. 20, 1986, 86-1 CPD PARA. 177, CONCERNING A PROCUREMENT CONDUCTED UNDER CICA, WE FOUND THAT THE ARMY'S DECISION TO USE A COST-PLUS-AWARD-FEE CONTRACT TO ACQUIRE FULL FOOD SERVICES AT FORT DIX, NEW JERSEY, WAS JUSTIFIED. (FOR CLARITY, WE WILL REFER TO THIS LATTER CASE AS THE "FORT DIX" DECISION AND TO THE PRESENT RECONSIDERATION AS THE "FORT JACKSON" PROCUREMENT.) ALTHOUGH CICA ELIMINATED THE STATUTORY PREFERENCE FOR FORMALLY ADVERTISED (NOW "SEALED BID") PROCUREMENTS, THE PREFERENCE FOR FIXED-PRICE CONTRACTS WAS PRESERVED, AND IT WAS THE ARMY'S DIFFERENT TREATMENT OF THIS ISSUE IN THESE TWO PROCUREMENTS WHICH LED US TO REACH DIFFERENT RESULTS.

IN OUR DECISION ON THE FORT JACKSON PROCUREMENT, WE POINTED OUT THAT WE HAVE GENERALLY REJECTED THE ARGUMENT THAT VARIATIONS IN MEAL REQUIREMENTS AND ATTENDANCE JUSTIFY THE USE OF NEGOTIATED COST-TYPE CONTRACTS. WE FIND SUPPORT FOR THIS VIEW IN ARMY REGULATION 30-1 (AR 30-1), SEPTEMBER 30, 1985. THIS REGULATION, PRESUMABLY DRAWING ON ARMY EXPERIENCE CURRENT AT THE TIME OF THE FORT JACKSON PROCUREMENT, STATES THAT THE NORMAL BID UNIT FOR GOVERNMENT-OWNED, CONTRACTOR-OPERATED DINING FACILITY OPERATIONS IS PER FACILITY PER DAY OF OPERATIONS (PARAGRAPH 13-3A) AND POINTS OUT SPECIFICALLY THAT SOME FACTORS, SUCH AS THE NUMBER OF PERSONNEL SUBSISTED, HAVE NO DIRECT RELATIONSHIP TO PRICE OR COST (PARAGRAPH 13-3B(3)). THE EXAMPLE CONTAINED IN THIS REGULATION IS ESPECIALLY PERTINENT TO THE JUSTIFICATION OFFERED BY THE ARMY AT FORT JACKSON:

FOR EXAMPLE, IF THE GOVERNMENT HAS ESTIMATED AN AVERAGE OF 125 DINERS PER MEAL, THE CONTRACTOR IS OPERATING AT MINIMUM STAFFING. IT HAS BEEN ESTABLISHED THAT THIS MINIMUM STAFFING WOULD ACCOMMODATE A RANGE OF 1 TO 175 DINERS PER MEAL, THEREFORE, A NEW ESTIMATE OF 165 DINERS PER MEAL WOULD NOT TRIGGER AN INCREASE IN PRICE. (AR 30-1 PARAGRAPH 13-3B(3)).

WE THINK THESE TWO SENTENCES APTLY ILLUSTRATE THE BASIS FOR OUR CONSISTENTLY HELD VIEW, OFTEN EXPRESSED IN THE "DINING FACILITY ATTENDANT" CASES TO WHICH THE ARMY NOW REFERS, THAT NOT EVERY UNCERTAINTY PRECLUDES THE USE OF A FIXED-PRICE CONTRACT. IN OUR JUDGMENT, THE ISSUE IS NOT WHETHER THERE IS UNCERTAINTY, BUT WHETHER THAT UNCERTAINTY IS SO GREAT OR HAS SUCH A DIRECT IMPACT ON PRICING OR COSTS THAT IT DIRECTLY INHIBITS AN OFFEROR'S OR BIDDER'S ABILITY TO PROJECT ITS COSTS OF PERFORMANCE.

IN THE FORT DIX PROCUREMENT, THE ARMY RELIED NOT ONLY ON VARIATIONS IN HEAD COUNT IN JUSTIFYING THE USE OF A COST-TYPE CONTRACT, BUT ALSO ON UNCERTAINTIES ASSOCIATED WITH THE INITIATION OF A NEW RECYCLING EFFORT, CONTRACTOR ACCESS TO DISPOSAL SITES, AND OTHER FACTORS WHICH WOULD HAVE A DIRECT EFFECT ON AN OFFEROR'S ABILITY TO PROJECT ITS COSTS OF PERFORMANCE. A VENDOR COULD NOT, FOR INSTANCE, PREDICT WHETHER IT NEEDED A SMALL NUMBER OF TRUCKS (AND STAFF) FOR MULTIPLE DAILY TRIPS TO A NEARBY DISPOSAL SITE OR A LARGE NUMBER OF TRUCKS TO MAKE SINGLE TRIPS DAILY TO A DISTANT SITE. WE BELIEVED THAT THE ADDITION OF THOSE UNCERTAINTIES, PARTICULARLY WHEN VIEWED CUMULATIVELY, HAD THE EFFECT OF SO IMPEDING OFFERORS' ABILITIES TO ESTIMATE THEIR COSTS OF PERFORMANCE WITH REASONABLE CERTAINTY THAT THE ARMY PROPERLY COULD VIEW THE USE OF A COST-TYPE CONTRACT AS APPROPRIATE FOR THE SITUATION.

IN CONTRAST, IN THE FORT JACKSON PROCUREMENT, THE ARMY MERELY RELIED ON ITS INABILITY TO ACCURATELY PREDICT THE TRAINEE POPULATION AS JUSTIFICATION FOR USE OF A COST-TYPE CONTRACT, WITH NO DEMONSTRATION THAT THE ACCOMPANYING UNCERTAINTY PRECLUDED REASONABLE ESTIMATION BY VENDORS OF THE COST OF PERFORMANCE. THE ARMY'S PRESENT REQUEST FOR RECONSIDERATION IS LITTLE MORE THAN AN EXPANDED RESTATEMENT OF THE ARMY'S ORIGINAL POSITION-- THAT MEAL COUNT VARIATIONS ALONE ARE ADEQUATE TO JUSTIFY A COST -TYPE CONTRACT. WE REJECTED THIS POSITION IN OUR ORIGINAL DECISION AND FIND IT NO MORE COMPELLING NOW.

WE ARE MINDFUL, HOWEVER, THAT THIS CONTRACT IS, AS THE ARMY ARGUES, MORE COMPLEX THAN THE TRADITIONAL MESS ATTENDANT CONTRACT AND INVOLVES MORE DIFFICULT COST AND PRICING ISSUES, MANY OF WHICH HAVE BEEN IDENTIFIED BY RICE. THESE ISSUES, HOWEVER, APPEAR NOT TO HAVE BEEN EVALUATED BY THE ARMY IN ITS DETERMINATION TO USE A COST-TYPE CONTRACT, UNLIKE THE SITUATION IN THE FORT DIX PROCUREMENT. THE PRESENT RECORD, THEREFORE, AFFORDS US NO BASIS UPON WHICH TO ASSESS WHETHER USE OF A COST-TYPE CONTRACT AT FORT JACKSON MIGHT NOT BE JUSTIFIED IN A MANNER CONSISTENT WITH OUR DECISION ON THE FORT DIX PROCUREMENT.

IN VIEW OF THE FOREGOING, WE FIND IT APPROPRIATE TO MODIFY OUR PRIOR DECISION TO RECOMMEND THAT THE ARMY ASSESS THE OVERALL RISKS AND UNCERTAINTIES ASSOCIATED WITH THE FORT JACKSON PROCUREMENT TO DETERMINE THE PROPRIETY OF USE OF A COST-TYPE CONTRACT. IF, AS A RESULT OF THIS STUDY, THE ARMY REASONABLY DETERMINES THAT A COST-TYPE CONTRACT IS APPROPRIATE, THEN IN LIEU OF A NEW COMPETITION THE ARMY MAY EXERCISE THE OPTIONS UNDER THE PRESENT CONTRACT IN ACCORDANCE WITH FAR SUBPART 17.2.

OUR PRIOR DECISION IS MODIFIED.